Federal Deficit Climbs Again, Putting It on Track for $1 Trillion This Year

By Jim Tankersley
Jan. 8, 2019

WASHINGTON — The federal budget deficit continued to rise in the first quarter of fiscal 2019 and is on pace to top $1 trillion for the year, as President Trump’s signature tax cuts continue to reduce corporate tax revenue, data released Tuesday shows.

The monthly numbers from the Congressional Budget Office also show an increase in spending on federal debt as rising interest rates drive up the cost of the government’s borrowing.

The widening deficit comes despite a booming economy and a low unemployment rate that would typically help fill the government’s coffers. Federal spending outpaced revenue by $317 billion over the first three months of the fiscal year, which began in October, the budget office reported. That was 41 percent higher than the same period a year ago, or 17 percent after factoring in payment shifts that made the fiscal 2018 first-quarter deficit appear smaller than it actually was.

The report did show one area of increasing revenue — from Mr. Trump’s sweeping tariffs. Revenue from levies on imported steel, aluminum and Chinese goods were up $8 billion from the same quarter a year ago, an 83 percent increase. That increase, however, is nowhere close to the levels needed to support Mr. Trump’s frequent claims that his tariffs will help pay down the national debt.

9. I take exception to this paragraph

"It continued a trend from the final three quarters of 2018, after the tax cuts took effect: falling tax receipts, at a time of relatively strong economic growth — a combination that shows the tax cuts are achieving nothing close to the administration’s promise that they would pay for themselves."

Tax receipts are up compared to same time period last year. I don't know what pay for themselves means but the Fed is bringing in more money this year than they were last year.

4. And this is why President Trump was gently encouraging the Fed not to raise interest rates.

I'm only surprised more US politicians aren't doing the same. The Fed interest rate raises so far are already hitting hard in a lot of the rest of the world.

The beast from 2008 never really died. It didn't even really slumber, it has just had uncounted trillions of dollars shoveled into it's maw by the world's governments to keep it at bay. They are starting to run out of their ability to do so without severe repercussions.

I have been reviewing financial data to make some changes in my investment portfolio. My guess is that the US is safe for about another year, depending on what happens in Europe with Brexit. No matter what, we will start seeing significant tightening in the velocity in money in the system similar to spring and summer 2008 towards the end of 2019. It's all a matter of which domino falls first this time, and my best guess, though I am probably wrong, is it will be deutschebank, again, because of events that will happen around Brexit, everything collapses to a single point because the politicians don't have a lot of options.

My second guess is that this might be worse than 2008, and I wish I didn't feel so worried about it.